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When a fund manager flees, should you?

(Money Magazine) -- Navigating a choppy market is hard enough. Making matters worse is the fact that some of the most respected skippers in the fund industry are leaving the portfolios they've helmed for years.

Among them are FPA's Robert Rodriguez, Morningstar's 2008 bond manager of the year, who's on sabbatical, and Jack Laporte, who's retiring after a successful 22-year run at T. Rowe Price New Horizons.

When managers shove off, should you go too? It depends on the circumstances. So ask yourself the following questions:

1. Why is the manager leaving?

Sometimes a manager is forced to leave because his performance was poor, in which case you might be happy to see him go. But there are times when managers with stellar records exit, which can lead to discontinuity at the fund.

Take TCW, which recently fired star bond manager Jeffrey Gundlach, accusing the head of TCW Total Return Bond of trying to start a rival firm. While TCW acquired Metropolitan West to replace Gundlach and his 40-person team, the resulting fund won't be exactly the same.

Gundlach, for example, was known for making aggressive bets on either high- or low-quality mortgage bonds. So if you invested in the fund for that specific style of management, you may want to switch.

2. Was your manager part of a system?

A good example is the legendary value-investing shop Tweedy Browne. When senior adviser Christopher Browne died in December, he left behind a team whose tenures range from 19 to 36 years.

Similarly, while Rodriguez is gone this year, co-managers at FPA New Income and FPA Capital will soldier on.

Morningstar's Russel Kinnel cites T. Rowe Price and Dodge & Cox as other firms with a cohesive approach. Contrast that with Fidelity, he says, where "a manager change almost always means a strategy change."

Indeed, when Larry Rakers took over Fidelity Dividend Growth in 2008, he turned a mega-cap fund into a portfolio that invests in small-, mid-, and large-cap shares.

3. What are the tax implications?

If you're investing outside a 401(k) or an IRA, the tax consequences of a manager switch can be tricky.

For example, if your manager is replaced by a stock picker who overhauls the fund, that trading could lead to a taxable gains distribution later in the year (they usually come at year-end).

But if you choose to sell a fund where a transition is orderly, you could be the one triggering an unnecessary tax bill. This is an argument for taking it slow -- and seeing how the transition unfolds before making a hasty move.